Beats Music Has Only 111,000 Paying Subscribers…

Beats co-founder Jimmy Iovine claims half-a-million people are paying for a Beats Music subscription. This royalty document, leaked to Trichordist over the weekend, suggests completely otherwise.

“Someone sent us this interesting document,” said artist activist David Lowery (and head of Trichordist), who marked up the leak to highlight some abysmal royalty payouts (see below, full doc here). “This is real.”

61,621 + 49,371 = 110,992

Even more more concerning is the royalty rate involved: Lowery calculated that Beats is paying songwriters $0.000126 per song played, based on the document.

In all fairness, 60k of those subscriptions are family plans. I believe those are for five people max, so it’s only a minor spin to count those as 300,000 subscribers in total. It is certainly fairer than counting them as single subscribers, since each family subscription is worth more. Granted, this adjustment still pegs the number of subscribers at around 350k – short of the half-a-million figure – but that becomes a question of when Iovine made the comment. Unless it was during the period this statement is for (March) it might well be true – for a “we included a family plan multiplier” value of true.

I find the play counts much more interesting than any number here, since they give us an idea of how much usage we can expect on a subscription service. It is remarkable that single subscribers generate nearly twice the number of plays that family plans do, even more so if we consider the fact that there are fewer single subscriptions than family plans.

Given that the play count of individual users is so drastically higher, I wouldn’t go out on a limb to inflate those family plan numbers. I would guess that, in many of those cases, a single user was the impetus for a family plan signup… it doesn’t seem like everyone is on board with those family plans just yet, at least judging from March numbers.

We can’t actually make such a simple inference. More likely: a portion of those family plans were part of a larger internet service bundle (I distinctly remember reading about Beats making such deals on these very pages).

In a bundling situation, the Beats subscription would’ve been – at best – a secondary consideration and it is unsurprising that these bundled plans wouldn’t generate as much usage as individual subscriptions by people who want to get as much music as possible for as little money as someone is willing to charge.

Well my point is… what are we counting as a user? Someone who has access or someone who does access?

I don’t really see mom or dad coming home & saying, “Alright, family. We all have Beats now. Mom, you can abandon your CD collection. Kids, throw away your iPods, & stop using Spotify. We’re a Beats family from this point forward. Yeah, I know… it’s hard to get straight to what you want to hear & you’re kind of overwhelmed with playlists that you may or may not be interested in. But we’re paying for it, so we’re using it.”

I had video streaming bundled with Amazon Prime for two years before I ever even realized it… now I use it maybe once a month or less. It’s still not my go-to for streaming video… I only use it if I can’t find something on On Demand, Netflix, or Hulu Plus.

So I think family plans are going to be closer to 1 or maybe 2 users per account for a while, & bundled plans might be closer to just 1 user, if even that.

Actually, it looks like they have even less. March 1st-31st, all family subscribers would still have been trial users. How many of those subscribers stuck around and are still active, we have no way of knowing. It is also unclear if the 61,621 number is the number of accounts or the number of users using the accounts (up to 5 per account).

Beats individual subscriptions would also have users on trials. And does the Beats Individual subscription also include MOG users? That is also unclear, but I am thinking it does. Beats does not have a free/ad-supported service, but MOG does and those plays look to be included in this statement.

roughly 2 out of 3 plays was royalty free, that’s interesting to me. I wonder is this has to do with a promo period for the subscribers or the duration of each play or something else I’m not even thinking of. Apple is obviously purchasing a brand and not a reputable service.

Wow. I can’t believe you’re just writing these articles one after the other without even realizing that Apple is primarily interested in Beats Electronics – the HARDWARE company. The one that makes Headphones. The streaming service of Beats is going to be a tiny part of this $3.2 billion valuation.

The valuation is based on the cashflow of Beats Electronics and the potential value of the tech of Beats Music. Beats Music as a standalone entity is not worth much of anything, but the tech bolted onto Itunes is (and would only amount I would take a thumbnail guess at maybe 30% of the overall valuation).

Apple computers is one of the biggest copyright thieves on this digital planet; now they’re getting ‘ Donald Sterling NAACP ‘ fame by making one top rapper a billionaire after stealing out the independents. . .Wow !

There are 49,371 individual subscribers and those individuals were responsible for 116,388,729 total plays (streams, spins, plays, etc.). Of the total plays, only 86,504,235 were royalty bearing streams (probably meaning 29,884,494 songs were skipped before 30 seconds played).

If so, then how many songs (including skips) did a user listen to in one day? So 116,388,729 / 49,371=2,357 which is the total number of streams for one individual in the month of March. Divide that number by 31 and you have an estimated total number of streams for one individual during one day (i.e. 2,357 / 31=76).

So is it correct that the average individual Beats user streamed 76 songs per day in the month of March or approximately 5 hours of music each and every day in March? I call BS.

This is the royalty statement that Beat’s royalty administrator, Medianet, gives to anyone earning publishing royalties. Another servicer, Music Reports inc (Sometimes called MRI), sends a similar report for Rdio, Xbox, and others.

HFA (through their Slingshot Division) does Spotify, Rhapsody, and others does not provide the same level of transparency but provides the same services: identifying which publishers to pay out.

These statements read like a tax form but are quite helpful in being able to understand the royalty calculations once you’ve looked at them long enough.

The market has clearly communicated that it doesn’t like the idea of a Beats deal with Apple. However, most naysayers and the media have struggled to properly articulate the reasoning for the bearish sentiment.

This is how it should be communicated:

– Beats should be viewed as a fashion company, as they offer very little value-add from a technology perspective. Beats main market are teenagers who currently view the earphones as a “cool” fashion statement. This is the root of the concern, as we all know that fashion statements quickly become “uncool” due to overexposure, boredom, or something more “cool” coming onto the market. It would be fair to say that the best days of the Beats “coolness” are behind it, and the sunset looms as they may soon become “un-cool”. Paying $3.2 billion for a company that will probably fade away into “un-coolness” soon is probably not a wise acquisition. One cannot buy long term “coolness”, as it must be created or earned.
– Apple could relatively easily create a superior headphone product at a fraction of the cost of the Beats acquisition, and Apple products are still very much “cool” and in fashion
– Apple could improve its streaming service for a fraction of the cost of this deal, and Apple subscriptions and profitability would remain leaps and bounds ahead of the Beats service.

On balance, very poor judgement at the top of Apple if this deal actually goes through.